Off the Fence: Three Tips to Help Women Start Investing

Summers are fine, but on the worst days of winter, the temperature can plunge to -25 Celsius with the wind chill. I wear all the right clothes, but stepping outside in that kind of cold is a shock. It is just so difficult to get motivated. After a few minutes of movement, I am nice and warm, loving the crisp air and sunshine, and smiling at other runners. But no matter how great the run turns out to be, that first step is the most difficult.

I think you know where I am headed. Whether it’s running or investing, getting started is the hardest part for most people — women included.

Some women never start investing.

My research uncovered three main reasons why many women “sit on the fence” when it comes to investing:

Some women aren’t interested in investing and don’t understand why it is important.

Some are perfectionists and feel they do not know enough to begin. They think the world of investing is “too big” or “too complicated,” and they are not interested in learning, especially when so much of it sounds like jargon.

Time is precious. Some women would would rather devote their energy to other, more pressing matters.

As advisers, our job is not to judge the reasons why our female clients don’t invest — our job is to get them started. Why is this so critical? Because cash is among the lowest performing asset classes over time, and on average, women live nearly five years longer than men. That means the average female retiree needs to save and invest well over $100,000 more than the average man.

The best cure for being “stuck” is a stronger competitive impulse. If you can help your clients determine why they should invest, there is a better chance they will make the commitment.

The main reason why women decide to invest? To take control and achieve financial independence. Talk to your clients about this. Wouldn’t it build confidence for a client to grow her knowledge, her wealth, and to be able to look after herself no matter what? What would that feel like? How would it make her life better?

“In more than half of the cases, women are responsible for the socioeconomic status of their family. We have to fully internalize this and realize that is up to us! Women changed the old paradigm of a stay-at-home woman who is dependent on a bread-winning male because we wanted freedom. But I’m not sure we fully understood some of the consequences of this freedom. Financial responsibility for our family is one of them, and as a consequence so is money. . . . My advice is to realize it is going to be up to us to care for the socioeconomic status of our family. Never to lose focus and always understand that you can’t buy into a dream or that someone else will forever take the responsibility off your back. I buy into dreams in many other respects . . . but not with my money.”

Women need to think about their futures and the futures of their family. Wouldn’t it be great to have a sense of security both for themselves and their families?

Toronto FORUM magazine editor Deanne Gage observed:

“People should think ahead more. Everyone focuses on getting the latest mobile phone; we live in a superficial consumer society. We are marketed to constantly. But you have to balance how you live today with how you want to live in the future. I now have more than twenty years of investing behind me. Don’t wait —invest in your future.”

2. Invest in what interests them or in ideas they understand.

Investing isn’t as complicated as many people think, and the sooner our clients start the better.

According to Anna Erman, head of marketing, corporate communication, and investor relations at Danske Bank, Stockholm:

“Many women don’t invest because they have been told it is too complicated. But investing is not difficult, you just need to get started. Take a small amount of money and invest in the things that you like. It should be intuitive. If you think it will be difficult, it will be.”

Encourage clients to carve out enough money for a discretionary account — this way they can do their own research, analyze companies that interest them, and practice buying stocks. Encourage them to be aware of trends and patterns — to think of investing as a window on the world.

“Females have great intuition and this is an important skill that can be applied to investing. Ask yourself: What are your financial goals? How are you going to get there? Don’t worry if you don’t have the ‘know-how,’ it is easy. You don’t need to read boring annual reports, just look for stories about companies that form part of your daily life. For example, if you are a regular customer of a pharmacy, take a look at who they compete with and start your own small analysis. You will gain confidence through these types of hands-on investing activities.”

Suggest that clients track their spending so they will have a better chance of living within their means. And the side benefit: They will notice the companies they do business with in their daily lives.

Jane Barratt, founder and CEO of GoldBean, in New York City, began to invest because she realized that she was earning good money but spending it all, and that she was making money for others rather than for herself. She explained:

“I took a look at my own spending habits and bought stocks accordingly. My first was Apple. The iPod had just come out and I could see that it was so different it was going to shake up the category. I bought $1,000 worth of Apple, and sold it a year later for $2,000. I don’t regret it at all, that first win gave me the confidence to continue to learn, and use investing as a second income stream.”

3. Make the investment process fast and simple.

Our clients have access to technology and all the tools it offers. Women of all ages are embracing the latest apps and investing platforms.

Irem Sozugecer, a former managing partner at Shopamani, an online shopping app, and an Istanbul resident said:

“Technology is making information accessible, so investing has become much easier. Thanks to social networks, chat apps, and mobile apps, women are becoming more and more tech-savvy. My 65-year-old mother is constantly on Facebook, iMessage, WhatsApp, and Skype. Every day she comes up with some information she found online — things I don’t know about, which I find absolutely amazing. Who knows where all this will lead? I wouldn’t be surprised if one day my mom tells me she bought stock in a medical research center via the Internet!”

Gamification is also a huge help in persuading female clients to invest.

“There are significant differences between men and women in all of our studies or focus groups in how they approach finance, the meaning that they ascribe to money, and their values,” Katharina Norden, CEO and cofounder of Three Coins, in Vienna, explained.

“Game-based learning is more effective than book-based learning and either way, learning really only occurs if people are able to connect it to their lives. Banks are slowly starting to realize they need to be working to develop products in a more human-centered way, as well as using game design principles. Banks need to redefine themselves.”

And yes, mobile has completely changed our clients’ lives when it comes to money.

As one female bank strategist I recently met with exclaimed,

“Don’t make me use my laptop! I want to use my mobile for transactions since that is superior in terms of accessibility. And when I have a need to talk [about] or discuss something, I prefer to have a live chat. Obviously, if I am discussing a major life event (such as buying a house or doing a full reorganization of my finances) I will want to talk to someone face-to-face. But apart from such quite rare moments, my everyday banking is definitely through the smartphone.”

Advisers can play a major role in encouraging their female clients to invest. So go ahead, start the conversation!

All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Barbara Stewart, CFA, is a researcher and author on the issue of women and finance. She will release the ninth installment of her “Rich Thinking” series of monographs on International Women’s Day, 8 March 2019. Stewart is also a consultant who uses her proprietary research skills to help large global financial institutions seeking to transform themselves. She is a frequent interview guest on TV, radio, and print, and she is a columnist for Golden Girl Finance. Stewart is on the Advisory Board for Kensington Capital Partners Limited in Toronto. All of Stewart’s research is available on Barbara Stewart.

2 thoughts on “Off the Fence: Three Tips to Help Women Start Investing”

‘Jane Barratt, founder and CEO of GoldBean, in New York City, began to invest because she realized that she was earning good money but spending it all, and that she was making money for others rather than for herself. She explained:

“I took a look at my own spending habits and bought stocks accordingly. My first was Apple. The iPod had just come out and I could see that it was so different it was going to shake up the category. I bought $1,000 worth of Apple, and sold it a year later for $2,000. I don’t regret it at all, that first win gave me the confidence to continue to learn, and use investing as a second income stream.”

The example above shows a necessity of pedagogical explanation. For earning good money but spending it all strictly isn’t making money for others rather than for herself as the spending provides the utility as underlyng that satifies her own want as well as the return on investment as regards Apple. Thus the whole issue here lies in the idea of cost of opportunity. That is in making the choice to invest in share rather than to buy now something else she has somehow postponed consumption. Therefore investment can be explained as a form of saving and it does not follows that spending means making money for others otherwise strictly investment is likewise making money for others.

More than 130 business leaders have responded to a deadlock in the UK Parliament by signing a letter calling for a second Brexit referendum to prevent a chaotic withdrawal from the EU. "The only feasible way to do this is by asking the people whether they still want to leave the EU," the letter says. CNBC (17 Jan.)

The Chinese government is likely to establish a growth target for this year that falls short of the 6.5% target set for 2018, sources said. This year's target is expected to be 6% to 6.5%. China Daily (Beijing) (18 Jan.)

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